There should be a distinct differentiation between the purpose of a lifestyle portfolio, which is to invest in for your current needs, and the objective of an investment portfolio that must provide you with an income after your retirement. The latter must help you to have a roof over your head and enable you to maintain your lifestyle after retirement.
These two portfolios mostly lead to a certain extent of tension. As we know, it’s never easy for people to spend less on their families’ current lifestyle needs. As your income increases, your monthly expenses will usually also increase, despite inflation, in order to live more comfortably.
“But be careful not to buy things that you do not need with money that you do not have in order to impress people that you do not even like,” warns Hester van der Merwe, who was named the Financial Planning Institute’s (FPI) Financial Planner of the Year at the end of 2020.
Two portfolios closely intertwined
From there stems the greater emphasis that financial advisers usually place on providing for retirement. Van der Merwe points out that one’s lifestyle portfolio and your investment portfolio for retirement are closely intertwined. If people do not analyse all their objectives together with a financial planner, the chances are great that one of the two portfolios will be neglected.
“Regard and consider all aspects with a balanced eye and mind,” says Van der Merwe. “Your career and retirement; your family; all the needs and further development of other family members; your health; recreation; possible involvement in the community; and your legacy all come into play. It doesn’t help should you lose sight of one phase that’s important to you. All people’s needs differ.”
According to Van der Merwe, studies of the brain have shown that people are prone to have far less sympathy with their future self than their current self. In other words, thinking about where you would one day like to be is almost like speaking about a stranger.
Strike the right balance
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